Author Topic: How to Finance a Second Property?  (Read 2550 times)

Sherry

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How to Finance a Second Property?
« on: February 04, 2015, 01:06:51 AM »
I know that several people on this board own multiple rental properties, and I hope to lean on their experience.  We are a few months away from paying off the mortgage on our 2-flat, and I hope to buy a small investment rental condo, but am unsure about the best way to finance it: home equity loan, HELOC, traditional mortgage, 5/1 ARM.  Any thoughts?

More specifically, we are looking at pretty inexpensive units ($100-160K) that we can pay off in a couple of years.  Unfortunately, several of the particular units are ineligible for mortgages and need to be cash sales -- besides HELOC or home equity loans, is there another way to finance this type of sale? 

Thanks in advance for any suggestions, advice or specifics to consider. 

kathrynd

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Re: How to Finance a Second Property?
« Reply #1 on: February 04, 2015, 03:22:43 AM »
We have several properties, and live soley on rent now.

We used the equity from our home to start our 'empire'.


Another Reader

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Re: How to Finance a Second Property?
« Reply #2 on: February 04, 2015, 05:48:54 AM »
Often condos are ineligible for conventional mortgages because the percentage of rental units exceeds the limit allowed by the buyers of the loans.  I would be very cautious about buying units in those projects.  They can be poorly maintained because of the lack of interest from the absentee owners, and while you may screen your tenants well, other landlords may not.  Often you get large special assessments when a major problem, such as a bad roof, can no longer be ignored by the HOA.  What you end up with is a large apartment complex with many different owners and no tenant control or maintenance standards.

chasesfish

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Re: How to Finance a Second Property?
« Reply #3 on: February 04, 2015, 05:54:39 AM »
Sherry,

This is actually easier than you think.  Most banks make "in-house" loans for real estate investors.  They're classified as Commercial Real Estate Loans, because the repayment comes from income generated by the rental property.  You put 20-25% down and they'll finance it on a 5-7 year loan and give you a 15 or 20 year amortization. 

The best way to find an institution in your area is the FDIC market share search by county/city.  Community and Regional Banks make most of their income from financing commercial real estate.

https://www2.fdic.gov/sod/sodMarketBank.asp?barItem=2

A bank with 5-100 branches in total is what you're looking for.  They can also just make a loan against your existing property to finance the new house.   Good luck!


 

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